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VW looks to the future

VW restructuring

Volkswagen hopes to bounce back from its diesel emissions scandal with a broad restructuring that will mean more battery-powered cars, digital services such as ride-sharing, and more SUVs for the US market.

Herbert Diess, the head of the Volkswagen division of the overall Volkswagen Group, unveiled the company’s Transform 2025 plan at a news conference this week, saying that “in the coming years, we will fundamentally change Volkswagen. Only a few things will remain as they are”.

The plan foresees a major shift in focus toward investments in electric-car technology and in software to enable new ways of using and sharing cars. The Volkswagen division alone expects to sell a million electric vehicles a year by 2025. Including the company’s other brands, such as SEAT, Skoda and Audi, the Volkswagen Group expects to sell up to 3 million electrics by then.

Diess said the company would also “massively step up” its capacity to develop software, aiming to create industry-leading programs and hardware systems for digitally connected and autonomous cars by 2025.

Another element of the plan is increasing sales in the US by introducing products that are more appropriate for the market, such as more SUVs and larger cars. This year, Volkswagen-badged cars have only 1.8 per cent of the US market through October, badly lagging behind competitors such as General Motors, Ford, Fiat Chrysler and Toyota.

Diess also said the company would start making electric vehicles in the US by 2021. Currently Volkswagen makes Passat sedans at its plant in Chattanooga, Tennessee.

“For years, a concept for success in the US has been lacking,” Diess said at the company headquarters in Wolfsburg, Germany.

“Sometimes we have not been on the bandwagon with new market trends.”

He said regional managers would get “more local responsibility” to make decisions and meet local conditions.

The plan for the Volkswagen brand follows an announcement that the division would cut 30,000 jobs, of which 23,000 would be in Germany, and create 9000 jobs focused on new technologies.

Diess said the company aimed to raise profit margins on sales to 6 per cent by 2025, from just 2 per cent in 2015. Profitability at the Volkswagen brand has lagged due to its higher cost base, the result of a strong role for employee representatives. They have half the board seats, and are generally supported by the government of Lower Saxony, which holds a stake in the company.

The company struck a deal with its workforce, which agreed to the job reductions through voluntary means such as early retirement over a period of years. In return, employees won a commitment to locate technology development and manufacturing in Germany.

Volkswagen has agreed to pay $US15 billion under a settlement with US authorities and car owners over cars equipped with software that turned off emissions controls under normal driving conditions. The scandal has served as a spur for the company to shake up its management culture. -AP

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